Bill Introduced to Repeal Online Gambling Ban

In comments to reporters this morning, Rep. Barney Frank (D - Mass.) confirmed he intends to introduce legislation before the US House of Representatives tomorrow that would effectively repeal a portion of a shipping ports protection bill that, just incidentally, prohibits US banks from transferring funds to and from regions of the world where gambling is not expressly permitted.

Last October, in one of his last procedural ploys as a US Senator, then-Majority Leader Bill Frist (R - Tenn.) successfully attached language from a failing gambling funds transfer ban bill to the end of an anti-terrorism bill which President Bush had already indicated he would sign into law. While the attached text did not explicitly ban Internet gambling in the US, it eventually took on the name Unlawful Internet Gambling Enforcement Act (UIGEA) - presenting the appearance of having made Internet gambling unlawful.

However, the interstate transmission of funds connecting with wagers, including horse racing, was already deemed unlawful, as a Dept. of Justice representative told a House panel in April 2006. "The Department of Justice views the existing criminal statutes as prohibiting the interstate transmission of bets or wagers, including wagers on horse races," reads a statement read into the Congressional Record from a DOJ representative. Senators including Frist had cited this statement as an indication that the UIGEA language would serve to reinforce existing gambling laws.

Almost immediately after the bill passed, the stock value of many UK-based gambling hosts plummeted, prompting several to cease operations.

Early this year, the government of Antigua raised objections over the US Government's assertion that the UIGEA upheld existing law deemed compliant by the World Trade Organization. Negotiations between trade representatives of the two governments, according to WTO reports, became hopelessly bogged down over, quite literally, the meaning of the word "taken" as used in the phrase "the US has already taken action." Partly due to the need to terminate an embarrassing argument, the WTO last March ruled UIGEA (sometimes heard pronounced "wee-jee" as in "Ouija board") illegal under international law.

There has been some discussion about the notion of punitive action against the US. A larger country may be allowed by the WTO to impose trade sanctions against a country found to have violated trade law, but Antigua has said it cannot afford to jeopardize one of its few sources of income.

Back in March 2006, when it first appeared the UIGEA bill would pass in its original form, Boston Globe reporter Hiawatha Bray learned that Antigua was openly considering a threat (openly considering, not openly threatening) to loosen restrictions against protections of intellectual property claimed by US firms. In other words, Antigua would counter a potential passage of UIGEA by deciding to look the other way if software pirates chose to set up shop in its country.

So there may be any number of possible reasons for repealing the law currently on the books, which can theoretically be done without repealing the ports protection part that the President originally wanted.

But speaking before a group of bankers this morning, Frank was quoted as saying his reasons were purely libertarian. "Why anyone thinks it is any of my business why some adult wants to gamble is absolutely beyond me." The crowd was probably largely supportive, as US bankers are the parties directly held responsible for funds transfers to foreign gambling operations under UIGEA.

In an article for InformIT, Santa Clara University assistant professor of law Eric Goldman ranked UIGEA as his #8 Worst Internet Law. "Congress did not specify (in this law or elsewhere) what constitutes illegal Internet gambling," Prof. Goldman writes, "yet the law requires third-party money sources to block the flow of money to illegal gambling operations. Thus, just like Kafka might write it, Congress deputizes private actors to block illegal activity without deciding for itself what constitutes illegal activity."

Yet even though some states where gambling is obviously legal - such as Nevada - were not impacted by the legislation, congresspeople from those states may still be opposed to a repeal. The availability of online gambling, some say, competes directly with legitimate in-state operations, a significant share of whose revenue goes to fund states' projects.

Prominent Democrats in Congress may yet oppose efforts to repeal the law. Last June, Rep. Rick Boucher (D - Va.) spoke out in favor of the legislation in its original form. "The basic policy we are promoting was adopted in the 1960's when Congress passed the Wire Act," Rep. Boucher remarked on the House floor. "That law makes it illegal to carry out a gambling transaction through the use of the telephone network. We are modernizing the Wire Act to account for the arrival of the Internet as a communications mechanism by making it illegal to use the Internet for gambling transactions also."

Rep. Boucher is the principal sponsor of legislation that would make significant exemptions to what Prof. Goldman considers the #7 Worst Internet Law: the Digital Millennium Copyright Act. That legislation, which would make reverse engineering for non-commercial purposes legal, may require the support of Rep. Frank and others if it's expected to survive.

In addition, any bill that would repeal an amendment to the Wire Act could possibly call the existing language of that act into question, which deals with wiretapping, privilege of communication, and other matters of current interest to the US Justice Dept.